The Chairman of the US Securities Exchange Commission (SEC), Gary Gensler, is facing political backlash for his approach to cryptocurrency regulation. Judges overseeing the Ripple and Coinbase lawsuits have criticized the SEC for its lack of consistency in applying laws and accused the agency of "hypocrisy" in the Ripple case. Additionally, the SEC failed to respond transparently to a request for clarity on crypto rules from US exchange Coinbase.
Critics argue that Gensler's efforts to regulate crypto and other industries are driven more by ideology than practicality. Congressman Ritchie Torres, a vocal critic of Gensler, has accused the former Goldman Sachs partner of being a "politician masquerading as a regulator." Gensler's stringent stance on cryptocurrency has faced resistance not only from political opponents but also within his own party.
Even the US Supreme Court has expressed hostility towards regulatory agencies exercising discretionary powers over industries. Coinbase, in its defense against SEC charges of running an unregistered brokerage, invoked the major questions doctrine, asserting that Congress does not permit agencies to expand their jurisdiction on crucial economic or political matters.
Ripple Labs, in successfully contesting SEC accusations related to the sale of XRP to retail buyers, awaits a court ruling on whether sales to institutional investors constituted unregistered securities. If the court rules in favor of Ripple, it may bring to light documents where a former SEC official stated that Bitcoin (BTC) and Ethereum were not securities.
The SEC's inconsistencies have come under scrutiny in various legal battles. The rejection of Grayscale's application to convert its Bitcoin trust into an exchange-traded fund was deemed "arbitrary and capricious" by the court. Ripple lawyer Stuart Alderoty highlighted the SEC's questionable representations in another case, prompting questions about potential disciplinary actions.
Pro-crypto lawyer John Deaton, expressing disillusionment with the SEC's inconsistent applications of securities laws, decided to invest in XRP after the SEC sued Ripple, believing that the judge would uphold the law. As legal battles unfold, Gensler's ambitious plans for crypto regulation may face significant challenges in the courts, potentially limiting the SEC's regulatory authority beyond what Congress has granted.
